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Source BioScience plc: Possible Offer for Vindon Healthcare plc

Source BioScience plc: Possible Offer for Vindon Healthcare plc

Nottingham, UK – 15 July 2013 – The Board of Source BioScience (the “Board”) the international diagnostic and genetic analysis services business, announces that it is at an advanced stage of discussions with the board of Vindon Healthcare, a leading provider of controlled environment services and products to the pharmaceutical and life sciences sectors in the UK, Ireland, Europe and North America, regarding a possible all cash offer (the “Possible Offer”) for the entire issued and to be issued share capital of Vindon Healthcare not already owned by Source BioScience, at a price of 13.7 pence per Vindon Healthcare share (the “Possible Offer Price”).  The Possible Offer would value the entire issued and to be issued share capital of Vindon Healthcare at approximately £12.2 million.

The Board of Source BioScience believes that an offer at this price would represent a very compelling 44% premium for Vindon Healthcare shareholders compared to the closing mid market price on 15 July 2013, being the last trading day before this announcement.  Further information on an offer for the entire issued and to be issued share capital of Vindon Healthcare (the “Offer”), if made, would be contained in an offer document to be posted to Vindon Healthcare shareholders following the subsequent announcement of a firm intention to make an offer, in accordance with Rule 2.7 of the Takeover Code.

In anticipation of making the Possible Offer, Source BioScience has today procured from the director shareholders of Vindon Healthcare irrevocable undertakings to accept the Possible Offer, if made at the Possible Offer Price, in respect of their existing holdings in Vindon Healthcare, amounting in aggregate to 24.68 per cent. of the existing issued share capital of Vindon Healthcare.  Details of these irrevocable commitments are set out below.  The Board reasonably expects that the Possible Offer would receive a unanimous recommendation from the Vindon Healthcare directors, subject to the receipt by them of appropriate independent advice in accordance with Rule 3 of the Takeover Code.  This statement is being made with the consent of Vindon Healthcare.

The Board believes that Vindon Healthcare represents a significant opportunity in the context of Source BioScience’s growth and stated acquisition strategy. The Board considers Vindon Healthcare to be an excellent strategic fit with Source BioScience’s business and believes that completion of the Possible Offer will provide a number of commercial, operational and financial benefits which would be expected to create value for Source BioScience shareholders.  The anticipated benefits for Source BioScience of a completed acquisition of Vindon Healthcare include:  geographic expansion in the United States, the United Kingdom and Ireland, a broadening of its product and service portfolio, particularly in relation to its offering to the pharma/biotechnology industry and Contract Research Organisation customers, operational benefits from sharing greater infrastructure, an enlarged customer base and cross selling opportunities, and financial benefits including potential earnings accretion and EBITDA1 margin enhancement for the enlarged business in the first full year of ownership.2  Further information on the merits of the Possible Offer is set out below.

The making of any offer by Source BioScience remains subject to completion and certain other pre-conditions, including but not limited to the unanimous recommendation of such an offer by the directors of Vindon Healthcare, and the arrangement of suitable funding which is also addressed below.  Source BioScience reserves the right to waive any of the pre-conditions, including that in relation to the unanimous recommendation in the event of a competing offer or proposed offer.

Furthermore, completion of the Offer, if made, would be conditional upon, amongst other things, Source BioScience shareholder approval under the Listing Rules and in order to obtain authority to issue new shares to partially fund it.

This announcement does not constitute an announcement of a firm intention to make an offer or to pursue any other transaction under Rule 2.7 of the Takeover Code.  Accordingly, Vindon Healthcare shareholders are advised that there can be no certainty that a formal offer for Vindon Healthcare will be made, even if the pre-conditions to the Possible Offer are satisfied or waived.

Earnings before interest, tax, depreciation and amortisation
2  This should not be construed as a profit forecast or interpreted to mean that the future earnings per share, profits, margins or cashflows of the Source BioScience group will necessarily be greater than the historic published figures.

Background to, reasons for and expected benefits of the possible acquisition
The Board believes that Vindon Healthcare represents a significant opportunity in the context of Source BioScience’s growth and stated acquisition strategy. It considers Vindon Healthcare to be an excellent strategic fit with Source BioScience and believes that completion of the Offer, if made, would provide a number of commercial, operational and financial benefits which are expected to create value for Source BioScience shareholders. In particular:

• The acquisition of Vindon Healthcare will provide the enlarged group with US-based facilities and operational infrastructure allied to an existing commercial network of customers and partners.  This offers Source BioScience the opportunity to extend its LifeSciences and Healthcare Diagnostic activities into North America to address a substantial US-based market for its products and services.  The US market is currently under-exploited by Source BioScience and Vindon Healthcare’s established infrastructure significantly de-risks market entry into this important territory for Source BioScience.  Further, the current location of the Vindon Healthcare infrastructure on both the East and West coasts of the US is aligned with the major centres of life science research activity and the distribution of potential customers.  In particular, Source BioScience anticipates being able to launch its DNA sequencing services promptly in these new locations following completion of the acquisition;

• Vindon Healthcare’s environmentally controlled storage solutions will also allow Source BioScience to further internationalise its products business, particularly with respect to clone products.  If the acquisition is completed, Source BioScience envisages operating a network of -80oC temperature storage facilities in key satellite locations worldwide which, when coupled with the extended reach of Source BioScience’s products business, would reduce the risk of investment in infrastructure with the potential to increase revenue from environmentally controlled storage services and Source BioScience’s products business in parallel. Currently the geographic reach of Source BioScience’s clone business is constrained because of the need to ship these products to customers on dry ice from the UK, which is both logistically challenging and costly;

• Source BioScience’s service expertise, particularly in diagnostic testing and genetic analysis services, will add breadth and depth to Vindon Healthcare’s existing services.  This will enable Vindon Healthcare’s storage service customers, especially those pharmaceutical and regenerative medicine customers, access to Source BioScience’s tissue and gene-based analysis testing services and technologies.  Customers’ samples stored with Vindon Healthcare often represent unique and valuable biological resources. Enabling storage and downstream analysis to be conducted at a single, accredited facility, will eliminate the need for costly sample transport and de-risks the process for the customer;

• Vindon Healthcare’s expertise in environmentally controlled storage will also directly benefit the enlarged group in a number of ways which the Board believes could be rapidly crystallised. Source BioScience currently offers a portfolio of more than 20 million cDNA clones which are stored in -80°C freezers at Source BioScience’s facilities in Cambridge with a duplicate archive maintained in Nottingham. Vindon Healthcare will be able to bring immediate benefits from its international storage solution expertise, to the advantage of the enlarged group;

• Vindon Healthcare’s service offering will add breadth and depth to Source BioScience’s existing products and services portfolio and enhance the combined customer base and geographical reach of the enlarged group. This would considerably strengthen Source BioScience’s pool of innovative technology and know-how, and its proposition across the range of specialist products and support services to the customers and prospective customers of both Source BioScience and Vindon Healthcare;

• Significant cross selling opportunities are likely to arise from each company selling its respective services to the other’s customer base, including into new territories when compared to the existing geographic market reach of the two businesses;

• The Board believes that the enlarged group would have greater potential access to funding and other resources required to pursue organic and acquisitive growth than either of the separate companies of Source BioScience and Vindon Healthcare;

• The combination of Source BioScience and Vindon Healthcare will provide complementary infrastructure and technology platforms to further crystallise opportunities for organic growth;

• The acquisition will potentially provide acceleration of geographic expansion into other territories holding significant commercial opportunities for the enlarged group, but where the prior lack of locally owned infrastructure has previously been an impediment to realising these opportunities, or where the product or service offering of each of the standalone businesses was previously too narrow to be likely to generate a sufficient return on investment; and

• Completion of the Possible Offer would be expected to result in accretion to the enlarged company’s earnings per share and EBITDA1 margin enhancement in the first full financial year following completion of the acquisition of Vindon Healthcare and the firm placing of new shares in Source BioScience to part fund it.

Earnings before interest, tax, depreciation and amortisation
2  This should not be construed as a profit forecast or interpreted to mean that the future earnings per share, profits, margins or cashflows of the Source BioScience group will necessarily be greater than the historic published figures.

Funding arrangements
Source BioScience is in the process of finalising funding arrangements for the Possible Offer, to include a firm placing of new shares (the “Firm Placing”) and drawdown under a new debt facility under negotiation with its lending bank.  Source BioScience intends to contact existing and prospective new institutional investors in order to secure firm commitments for the placing element of the funding.  The Board’s view is that the Firm Placing should be conducted at or around the current share price. 

Irrespective of whether the Possible Offer is made (or, if made, whether it completes), Source BioScience intends to launch an open offer (the “Open Offer”) to existing shareholders to provide additional growth capital for its business, to enable the Company to capitalise on other organic and selected acquisitive growth initiatives.  Should the Possible Offer proceed to be made as anticipated, the Open Offer will also provide an opportunity for existing shareholders to reduce the effects of dilution that would arise from the firm placing.

Source BioScience is progressing draft legal documentation in relation to the new debt facility, which the Board believes will be finalised on appropriate commercial terms having already received positive indication of commitment from its existing lender.  Assuming completion of the Possible Offer, the new debt facility would also be expected to provide debt refinancing in respect of the Company’s and Vindon Healthcare’s existing indebtedness. 

Further information relating to the possible Firm Placing and the Open Offer is expected to be contained in the prospectus to be issued in due course to Source BioScience shareholders if the Possible Offer proceeds as anticipated.

Takeover Code
Source BioScience notes that Rule 2.6(a) of the Takeover Code requires that Source BioScience, by not later than 5.00 p.m. on Monday 12 August 2013 (the "relevant deadline"), either announces a firm intention to make an offer for Vindon Healthcare in accordance with Rule 2.7 of the Takeover Code or announces that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Takeover Code applies.

The relevant deadline will cease to apply to Source BioScience if another offeror announces, prior to the relevant deadline, a firm intention to make an offer for Vindon Healthcare. In such circumstances, Source BioScience will be required to clarify its intentions in accordance with Rule 2.6(d) of the Takeover Code.  The relevant deadline may be extended in certain circumstances with the consent of the Panel and Vindon Healthcare.

In accordance with Rule 2.10 of the Takeover Code, Source BioScience announces that as at close of business on 15 July 2013, the issued share capital of the Company comprised 204,783,266 ordinary shares of 2 pence each (“Ordinary Shares”), with ISIN number GB0009739649. All of these Ordinary Shares carry voting rights of one vote per Ordinary Share.  Source BioScience holds no Ordinary Shares in treasury. 

Opening Position Disclosure
In accordance with Rule 8.1, Source BioScience owns 150,000 ordinary shares in Vindon Healthcare, in addition to the irrevocable rights to acquire shares amounting to 21,923,349 ordinary shares in aggregate described below.

Details of Irrevocable Commitments
The following table sets out the required disclosure in accordance with Note 3 of Rule 2.11 of the Takeover Code:

Party No. of
Ordinary Shares
Percentage of Vindon Healthcare
Issued Share Capital
Richard Hughes 15,200,349 17.11
Martin Liam Ferguson 4,150,000 4.67
Thomas Patrick Jackson 2,273,000 2.56
Martin Burrill 300,000 0.34
Total 21,923,349 24.68

 

All of the above irrevocable undertakings anticipate that any offer will be made at the Possible Offer Price and provided that the offer is made on terms which, in the reasonable opinion of Vindon Healthcare’s Rule 3 adviser, do not represent a diminution in value of the proposed terms of the offer set out in the irrevocable undertakings and will continue to be binding on such persons.

Each of the above irrevocable undertakings has been entered into by the relevant director only as a shareholder of Vindon Healthcare and not in their capacity as a director;  nothing contained in the undertakings requires any of the Vindon Healthcare Directors to take or not to take any decision or action in their capacity as a director of Vindon Healthcare.

The above irrevocable undertakings will cease to be binding if:

• a firm intention to make an offer or an offer for Vindon Healthcare is not announced in accordance with Rule 2.7 of the Code by 11.59 pm on 15 August 2013 (or such later time and/or date as Source BioScience and Vindon Healthcare may agree but in any event no later than in any event by 11.59 pm on 30 August 2013); or

• The offer document relating to the above announced offer is not posted to Vindon Healthcare shareholders within 28 days of the date of the above announcement, unless otherwise agreed with the Takeover Panel (with the consent of Vindon Healthcare); or,

• The offer, having been announced, lapses or is withdrawn.

 

Notes to Editors

About Source BioScience
Source BioScience plc (LSE: SBS) is an international diagnostics and genetic analysis business serving the healthcare and research markets. The LifeSciences division provides core laboratory research support from conceptualisation to implementation, calling upon a wide range of innovative technology platforms including an online catalogue of biomolecular . Source BioScience is a trusted provider of a complete range of sophisticated microarray, next generation and conventional sequencing services. GLP, GCP and CPA accreditations make the sequencing offerings very attractive for applications in regulatory studies or clinical settings. The Healthcare operations provide screening and reference laboratory diagnostic testing for cancer and other diseases and additional predictive testing for treatment optimisation for clinicians and patients. Source BioScience has its headquarters in Nottingham, UK. For more information, see www.sourcebioscience.com.

About Vindon Healthcare
Vindon Healthcare plc (AIM: VDN) along with its subsidiaries, is engaged in the manufacture of environmental control products for the pharmaceutical industry, life sciences and food sectors together with the provision of related services. The company provides products and services for the management of temperature, humidity and light, where controlled storage is required. Its product range includes controlled environment rooms and storage chambers, blood bank storage units and plant growth chambers. Vindon Healthcare also offers controlled environment storage facilities for its clients at its site in Rochdale. For more information, see www.vindonhealthcare.com

Information on this announcement
This announcement is not for release, publication or distribution in whole or in part, in, into or from the United States or any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction.

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities or the solicitation of an offer to buy any securities pursuant to this announcement or to the Offer, if made, or otherwise. There is no certainty that the Possible Offer referred to in this announcement will lead to a binding agreement or transaction between the parties.

If made, the Offer will be made solely by an offer document and a form of acceptance, which will contain the full terms and conditions of any offer made by Source BioScience for the entire issued and to be issued share capital of Vindon Healthcare not already owned by Source BioScience, including details of how that offer may be accepted. If the Offer is made, any acceptance or other response to the Offer will need to be made on the basis of the information in that Offer document and form of acceptance.

The distribution of this announcement in jurisdictions other than the United Kingdom may be affected by the laws of relevant jurisdictions. Therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom will need to inform themselves about, and observe, any applicable requirements.
This is an announcement falling under Rules 2.2(e), 2.4 and 2.5 of the Takeover Code and does not constitute an announcement of a firm intention to make an offer under Rule 2.7 of the Takeover Code.

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

 

Issued for and on behalf of Source BioScience.

To contact the Source BioScience team at College Hill, email SourceBioScience@collegehill.com

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Melanie Toyne-SewellManaging Partner